The costs of Harvard losing its tax-exempt statusThe Trump administration has escalated its war against Harvard, with the I.R.S. weighing whether to strip the university of its tax-exempt status. That follows President Trump calling for such a move on social media.
It would be the biggest blow yet to Harvard, which has resisted acceding to demands from Trump. Here’s what it might mean for the world’s wealthiest university.
Where things stand: The administration has already frozen more than $2 billion in federal funds and contracts after Harvard rebuffed its demands. The latest attack came yesterday from the Department of Homeland Security, which canceled nearly $3 million in grants.
Things could get much worse. Were Harvard to lose its tax status, it could owe not only federal income taxes, but it could owe taxes on its real estate holdings, which include properties in the Boston area, Washington and beyond. Perhaps more important, donations to the university would no longer be tax-deductible, which could put a serious dent in the gifts the school receives from its wealthiest alumni and supporters.
“Such an unprecedented action would endanger our ability to carry out our educational mission,” Harvard said in a statement. “The unlawful use of this instrument more broadly would have grave consequences for the future of higher education in America.”
The Wall Street Journal notes that the administration has also discussed a 35 percent tax on large university endowments. That could potentially cost Harvard more than $1 billion annually were it to earn a 10 percent return on its $52 billion endowment.
Despite Harvard’s wealth, it doesn’t have unlimited funds. The majority of its endowment is earmarked for specific purposes, meaning that it isn’t an A.T.M. That said, the school has moved to raise $1.2 billion so far this year.
There’s a broader concern. Federal law bars the president from either directly or indirectly asking the I.R.S. to audit specific targets. The prospect of a more politically driven tax regulator could weigh heavily not just on other higher education institutions, but on businesses more broadly.
A White House spokesman said that the I.R.S.’s deliberations had begun before Trump’s social media post. Still, many legal experts said that any effort to strip Harvard of its special tax status would take time, and the school could eventually appeal such a move all the way to the Supreme Court.
- In other Trump attacks on institutions: The administration is weighing whether to press the law firms like Paul Weiss that settled with the president to work on a wider array of issues than just charitable causes, The Times reports. That could include trade deals or even defending Trump in court.
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